EuroBusinessMedia (EBM): BNP Paribas, one of Europe's largest banks, just reported first quarter profit, Baudouin Prot welcome, you are the CEO of BNP Paribas, to begin, in a few words, how would you describe the bank's overall performance in the first quarter?
Baudouin Prot (BP): Well, I think really it is very clear that for BNP Paribas all the traffic lights are on green in this quarter except for BancWest which continues to suffer from the inverted yield curve in the US. I think that starting with CIB, CIB has successfully beaten the very strong numbers of the first quarter of 2006 with a 5% increase in revenues and a 12% increase in pre-tax income. Turning to our French retail operation, we are exactly on track with a 4.1% percent growth in revenues and with a positive jaw effect of over 1%.
Turning to BNL, the BNL integration is already a success; it is perfectly on track, if not doing better than expected, both in terms of revenue and costs. Then I think Cetelem, another very important part of the group, is generating a double digit growth in revenues and clearly confirming its position as the leader in Internet at European level. One word regarding the emerging markets, and notably Turkey, where the growth is really very strong and we're successfully plugging this new emerging markets retail operation into our integrated business model. And last, but not least, Asset Management Services has had very strong net asset inflows of above 11% and again a pre-tax income growth over 20%.
EBM: You've provided the market with a full year guidance of 4% growth for retail banking in France. Given the numbers you've now reported for Q1, do you still maintain your guidance for the full year? Is Q1 the low point in terms of margins, or could margins deteriorate further in the course of the year?
BP: We're pretty confident that we will match and implement our 4% revenue guidance, excluding PEL-CEL, for the full year and also that we're going to match our 1% - or over 1% - positive jaw effect on a full year basis for our French retail operation. In this quarter, we had the full impact of the 75 basis points increase in the regulated livret A savings rate of last year, and that should level off going through the year. One of the things we'll have to monitor is the decision of the European Central Bank. We believe that the Central Bank could increase to 4% its rate in June, then depending on what will happen later in the year we'll see. But overall, as I said, we are confident we will realise the objectives we have given to the market for French retail.
EBM: What is your update on the integration of BNL in Italy? Are things moving along according to plan? In particular, the market would like to know: whether you are successful at redeploying BNL's SME business, which was BNL's core business; whether you are successful at cross-selling with BNL; and whether you are successful at bringing BNP Paribas' retail expertise to BNL?
BP: Regarding the BNL integration, I think that we see every reason to already consider it as a great success. Not only the figures of revenues and costs, but regarding the retail operations we have successfully made the turnaround in terms of customer acquisition, the attrition rate is going down, we now have a net new number of customers for retail for the first quarter, very different from last year and the previous years for BNL retail operations. This is certainly the successful action of Stefano Calderano and the team of leaders we have at BNL and also the full use of the set of skills that BNP Paribas has moved from our French retail operations into BNL. Regarding the SME and corporate customer base of BNL, we are going to see further sales of value added products and cross-selling in Italy which has started and which I think is going to increase in the next few quarters, so I'm really very confident and I think it is already quite demonstrating that we bought BNL at the right time, at a price which looked reasonable at the time and which a year later is very favourable and I think that in terms of our integration skills and our ability to both extract cost synergies and also have revenue synergies, we are very much on track.
EBM: How would you describe the revenue dynamic in your US retail banking business today?
BP: Well, certainly, due to the inverted yield curve of the US economy environment, we've seen a steep decline of the net interest margin at BancWest, 27 basis points between the first quarter of this year compared to the first quarter of last year. And that is offset totally - it's a close to a 10% net interest margin decline, which explains the lower revenues totally offsetting the positive impact of volume growth, both on loans and deposits. In this environment, what is important is to increase the sales of fee-based products. We're working on that. Our organic plan is implemented, we have opened new specialised agencies, we are working hard on it. And the other thing is, cost wise, the cost base is also coming down which is good. And risk wise we've no exposure to the subprime market and we'll certainly continue to have conservative risk policy at BancWest.
EBM: You've been investing a lot of effort into growing your private banking business, but net asset inflows in 2006, though very high, grew less rapidly than some of your competitors. Should we be at all concerned by this fact, and how confident are you that you will regain the pole position in terms of growth of net asset inflows in private banking?
BP: I think that in private banking the figures are very strong and if anything, in France, where we are the number one market player, we see extraordinary strong growth in new customer acquisitions, also with a lot of cross referrals between corporate and investment banking and also the regular branch network and the private banking. But much beyond that, as I said, in this quarter all of our asset management services platforms do very well in terms of new net asset inflows, with 11% growth. I view this key, core business at BNP Paribas as growing revenue-wise and profit-wise very strongly, and so I think, I'm very confident that this is one the best businesses we have within the group.
EBM: In your capital markets business, 2006 was a record year, leading analysts to become increasingly sceptical these past 12 months about whether such a pace of growth is sustainable. In the light of your Q1 results, how confident are you about the sustainability of the growth in the capital markets business?
BP: Well, analysts and investors should certainly not underestimate the growth potential of our CIB franchise. I do believe that as long as the kind of present environment continues to prevail, our ability to grow revenues in our very strong franchises is there. We are in derivative products, we are in specialised financing products, where for example for Energy Commodities Export Project we are really a very strong, worldwide player and we see the benefit of that from quarter to quarter. For example regarding equity derivatives, we've been very successful in the US - we've just got the award for "Equity Derivatives House of the Year" for equity derivatives in the US last year. And I think that in terms of revenue potential we have still a great potential for Corporate Investment Banking. I really think that overall, the first quarter of this year has been another record quarter for corporate investment banking and we're going to hold in London on the 20th of June an investor day to give you more details on this exciting franchise.
EBM: The European banking sector is ostensibly in the midst of a new wave of consolidation, prompting the market to speculate on a possible merger between BNP Paribas and Société Générale. On the upside, there would be some obvious synergies between the two, but on the downside there would be considerable execution risks. Without telling us whether you're intending to launch a bid for Société Générale -- an obvious 'no comment' -- could you at least provide us today with your own personal views on the pluses and the minuses of such a scenario?
BP: Well, clearly BNP Paribas has been one of the foremost players in the European consolidation story over the last few years. Not only building intensively our very strong platforms, not only by strong organic growth, but also by, like I think 20 acquisitions in the last few years, corporate investment banking, asset management services and specialised financial services, but also by engaging last year in the BNL acquisition, which has now demonstrated its success and which has made BNP Paribas one of the rare European banks - there are three or four - which now enjoy two home markets in Europe. So this is really the BNP Paribas strategy, the one I like and the one I'll continue to implement in the next few years. Getting to your Soc Gen question, I would really refer you back to the former comments I've made on that issue. I certainly do consider that a tie-up between BNP Paribas and Soc Gen would carry considerable execution risks. Therefore, and I certainly want to be very clear on that, such a transaction is not on my agenda.
EBM: Lastly, LaSalle Bank in the US is in play. Are you potentially interested, and if not, why would such a US scenario currently not be on your agenda?
BP: Well we certainly were one of the banks who received the info memo on the LaSalle file. But clearly and definitely, first of all LaSalle is not in our footprint - our footprint in the US is West of Mississippi and the Western part of the United States, certainly LaSalle is not there. Also we think that due to the price consideration, we're not interested.
Baudouin Prot, CEO of BNP Paribas, thank you very much.
BP: Thank you.